New Sewer Taxes ? June 24
Council might back off of a tax measure for new money to fix sewers.
Recent information from Alameda County shows an unprecedented increase in the Real Property Transfer Tax flowing into Piedmont’s budget causing the City Administrator and Council to take another look at placing a sewer tax measure on the November 2014 ballot. The City has been considering a ballot measure to generate new money derived from an increase in the tax on real estate transfers. For cost effectiveness and water quality, the City seeks to expedite the 30% remaining of the sanitary sewer rehabilitation program.
The matter will be considered at a Special Meeting of the City Council in the Council Chambers on Tuesday, June 24 starting at 7:30 p.m. The meeting, open to the public, will be broadcast on KCOM Channel 27 and available live streamed from the City’s website.
“At the June 2nd meeting, the staff report for the first public hearing on the 2014-15 Budget included an update to Real Property Transfer Tax (RPTT) receipts. Based on the information provided by Alameda County through May 15, 2014, the City was estimated to receive
approximately $2.95 million and on pace to have a record year. At that time, staff continued to propose that funds in excess of budgeted amounts be allocated for unfunded retiree medical liabilities, facilities maintenance, and equipment replacement.Based upon receipt of new data provided by the Alameda County Assessor’s Office, FY 2013-14 will be unprecedented, with RPTT receipts through June 9th at $3.78 million. This is largely due
to an historic total of approximately $972,000 for the month of May. The total for May is only $43,000 less than what the City received for April through June combined for Fiscal Year 2012-13. The previous record for a single month of transfer tax was June 2006, with receipts of $694,840.”City Administrator Paul Benoit’s Report to the Council
The voter approved Sewer Fund originally was intended to rebuild and maintain Piedmont’s sanitary sewer system, however it was soon changed to include the City’s storm drain system. Both systems are recognized as important to protecting waterways from damaging effluent.
Historically, the City has used excess General Funds for purposes other than sewers: beautification projects, recreation facilities, employee compensation, $2.5 million for private undergrounding problems, etc.
The City Council offered a 2011 ballot measure to complete the remaining 30% of the aged sanitary sewers. The tax proposed would have essentially doubled property owners ‘ Sewer Fund Taxes from $471 to $849 and $707 to $1,274 depending on lot size. Piedmont voters rejected the tax increase when they learned of errors in the City’s cost estimates and incorrect statements on Environmental Protection Agency (EPA) requirements. Supporters of the sewer tax were undeterred by the new information and continued to support the sewer ballot measure that would have provided the City with new funds of approximately $11 million.
In a recent turn around on how much money was needed to accomplish EPA requirements, the City reduced the needed amount from approximately $11 million to approximately $1 million. City explanations of the dramatic change in needed funds to complete the sewer rehabilitation included overstated and incorrect calculations.
For years records were not kept by the Public Works Department on specific work hours or various projects charged to the Sewer Fund. Council members did not have information on the actual work charged the Sewer Fund.
A priority list weighing various uses, including sewers, with available City funds has not been produced by the Council.
Former Mayor Al Peters stated in an opinion:
“The City has an annual general fund budget of approximately $22 million. Allocating two percent a year to this project for three years would produce over $1.3 million. As of June 30, 2013, the City had over $10 million in reserves, including over $4 million undesignated and an additional $4 million set aside for capital improvements and equipment replacement. Why not use a portion of these funds to loan to the Sewer Fund rather than requesting an additional tax? If reserves are inadequate, the Council should address that issue in a comprehensive way, not by this piecemeal approach.”
As the City looks for new money for sewers, it places other projects ahead of sewers.
Capital Improve Project (CIP) funds are generally used for special projects. There is no information indicating the City prioritizes projects based on unavoidable expenses such as the completion of EPA required sewer work.
Although CIP funds and General Funds can be used for sewers, it is unknown if CIP allocations for sewer projects will be considered by the City Council. As of this writing, the significant infusion of funds supplied by the Real Estate Transfer Tax changes the budget numbers. Without a new sewer tax, it appears special projects could be implemented and the Sewer Fund could be provided with the funds necessary for renovation of the remaining sanitary sewers in a cost effective, expeditious manner.
To read detailed analysis on Piedmont’s Sewer Fund, go to the left side of this page and click on “Sewer Fund”.
Read the City Administrator’s Report to the Council
With the Real Property Transfer Tax now coming in at an unprecedentedly high level, the no tax option recommended by the Budget Advisory and Financial Planning Committee is an entirely viable option. I still find it remarkable that three years ago Eleven Million dollars was stated as needed; and, now it is questionable that $1M is needed. In 2011 the City stated an internal report by the Technical Advisory Committee (“TAC”) was critical in creating the need for the excess money asked for. After the election it was revealed there never was a TAC Report.
Despite the external financial downturn and our own internal “downturn” of misspent taxpayer money due to the utility undergrounding debacle, the Crest Road collapse, the Blair Park Project and the previously overly generous Pension Plans, the City has come through in remarkably good financial shape. I am encouraged by the multiple options presented by new City Administrator Benoit.
Current Real Property Transfer Tax (RPTT) receipts shown in the table in the City Administrator’s report do not account for the remaining 3 weeks of June home sales, so a conservative estimate of 2014 RPTT receipts of $4M is clearly called for. Assuming that number, the city will have a windfall of $1M, the exact number the BAFPC said is needed to augment the Sewer Fund to complete the replacement program. Why proceed with a tax surcharge at this point, especially one targeted at home sellers who have paid the Sewer Tax throughout their residency in Piedmont? A farewell slight to these long-term residents? If Council is to proceed with the surcharge, it needs to provide a clear policy rationale for its decision.